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The Handbook of Market Design$
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Nir Vulkan, Alvin E. Roth, and Zvika Neeman

Print publication date: 2013

Print ISBN-13: 9780199570515

Published to Oxford Scholarship Online: January 2014

DOI: 10.1093/acprof:oso/9780199570515.001.0001

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Optimal Incentives in Core‐Selecting Auctions

Optimal Incentives in Core‐Selecting Auctions

(p.282) Chapter 11 Optimal Incentives in Core‐Selecting Auctions
The Handbook of Market Design

Robert Day

Paul Milgrom

Oxford University Press

This chapter describes a new auction for differentiated goods — the ‘Product-Mix Auction’ — that was designed and implemented after the 2007 Northern Rock bank-run to help the Bank of England fight the financial crisis. The Bank now uses it regularly, and successfully. Bidders bid on multiple assets simultaneously, while bid-takers simultaneously choose supply functions across assets. The auction yields greater efficiency, revenue, information, and trade than running multiple separate auctions. It is often simpler to use and understand, and less vulnerable to collusion, than a simultaneous multiple round auction. Future applications might include purchasing ‘toxic assets’, selling electricity, and trading biodiversity.

Keywords:   core prices, core-selecting auctions, market design, mechanism design

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